Some decisions are hard. Others, however, are so easy that they require much less thought.
Three Motley Fool contributors believe they've found stocks to buy that definitely fall into the latter category. Here's why they think AbbVie (ABBV -4.58%), Pfizer (PFE 0.55%), and Vertex Pharmaceuticals (VRTX -0.06%) are no-brainer stocks to buy right now.
"Be greedy when others are fearful"
Prosper Junior Bakiny (AbbVie): Pharma giant AbbVie isn't currently popular with investors. The company's shares are down by 14% year to date. It's no wonder: AbbVie's financial results are suffering due to its losing U.S. patent exclusivity for Humira, its best-selling medicine. Patent cliffs for therapies that generate billions in sales can be hard to navigate for drugmakers, and the market doesn't seem too confident that AbbVie will do a good job of it. That's a mistake.
AbbVie is a no-brainer buy right now because the recent sell-off has created a solid entry point for a company with the tools to turn things around. These tools include AbbVie's newer immunology drugs, Skyrizi and Rinvoq, whose sales have been growing fast for a while. These medicines point to a deeper reason to trust that AbbVie's prospects are just fine: the company's innovative capabilities that have yielded more products since these two jewels.
One of the more recent additions is the migraine treatment Qulipta. The company's pipeline features potential brand-new products, such as cancer treatments navitoclax and telisotuzumab vedotin, lutikizumab, a potential medicine for a skin disease, and others that target systemic lupus, Alzheimer's disease, and much more. Of course, AbbVie can still count on its Botox franchise and legacy products, such as the cancer drug Venclexta.
Although its sales should decline for a little while, with a forward price-to-earnings ratio of 12.5 (compared to the average for the pharmaceutical industry of 15.1), AbbVie looks like a solid stock to buy at current levels. And that's before we get into it being a Dividend King currently on its 51st consecutive year of payout increases.
Both value and income-oriented investors should follow Warren Buffett's famous advice when it comes to AbbVie right now: "Be greedy when others are fearful." In other words, it's worth loading up on the company's shares before they rebound.
Pfizer offers a solid dividend and promising growth prospects
David Jagielski (Pfizer): Based on its underwhelming share performance this year and softening demand for COVID-19 vaccines, you might be tempted to think Pfizer is a bad stock to buy right now. But with the stock down 28% year to date and trading near its 52-week low, it's a no-brainer buy at this point, given its long-term potential.
Not only do you get an impressive 4.5% dividend yield from owning the stock, but Pfizer has also been focused on growing its business. The company has amassed more than $67 billion in free cash flow over the past three years, which has helped put it in a solid financial position today. As of April 2, 2023, the company had close to $20 billion in cash and short-term investments on its books.
Emboldened with strong financial results, the company has been aggressively acquiring pharma businesses, including Biohaven Pharmaceuticals, Global Blood Therapeutics, ReViral, Arena Pharmaceuticals, and its latest deal for Seagen, which remains pending. Those are all transactions it has announced or completed since 2022. And with plenty of cash still on its books, there could be more deals to come.
While investors may be bearish on Pfizer today, I think that will change over time. The company has 23 phase 3 trials ongoing, as its robust pipeline could lead to many more growth opportunities in the future. The company expects its pipeline and acquisitions to bolster its business with $25 billion in additional annual revenue by the end of the decade. While the company is facing some patent cliffs and a big drop in COVID-19 revenue, there's still plenty of growth ahead for the business in the long run.
Trading at only 11 times its estimated future profits, Pfizer could prove to be a steal of a deal for long-term investors willing to buy and hold.
Simply the best
Keith Speights (Vertex Pharmaceuticals): To paraphrase the late great Tina Turner, Vertex Pharmaceuticals is simply the best when it comes to big biotech stocks. While that's just my opinion, I think the facts back me up.
I can't think of another drugmaker of Vertex's size that has no competition. The company markets the only approved therapies that treat the underlying cause of cystic fibrosis (CF). Its closest potential rival is still only in phase 2 clinical testing.
Vertex still has room to grow in the CF market. However, its opportunities beyond CF are even greater. We shouldn't have to wait long for the first of those non-CF therapies to reach the market. Vertex and CRISPR Therapeutics await U.S. and European regulatory approvals for exa-cel in treating sickle cell disease and transfusion-dependent beta-thalassemia.
In addition to exa-cel, more potential blockbusters could be on the way. Vertex expects to wrap up late-stage studies evaluating VX-548 in treating acute pain by late 2023 or early 2024. If approved, the company believes the non-opioid drug will be a big commercial winner.
Vertex also has high hopes for inaxaplin in treating APOL1-mediated kidney disease. It's already in a pivotal phase 2/3 study. There are no therapies on the market that treat the underlying cause of APOL1-mediated kidney disease. And the indication impacts more patients worldwide than CF.
With its tremendous potential, you might think Vertex stock would be priced to perfection. That's not the case, though. Shares currently trade at a price-to-earnings-to-growth (PEG) ratio of only 0.56. Any level below 1.0 is considered to be attractively valued.
As icing on the cake, Vertex might not be far from launching its most powerful CF therapy yet, with a triple-drug combo featuring vanzacaftor. The company also is developing a potential cure for type 1 diabetes that's in early-stage clinical testing.
Is Vertex simply the best? I think so.
